Time to do away with ‘WYSIWYG’ model of outsourcing

Traditionally, software outsourcing contracts were executed in a fashion where a fixed-price contract was entered into for a fixed-scope engagement. The scope of the project was predetermined, i.e. for X amount of dollars you would get the Y outcome delivered.

Wonderful, isn't it? A WYSIWYG arrangement where "What You Scope is What You Get" and it is a win-win for both the outsourcer and the service provider.

Now let me throw in two interesting items into the mix that challenge this now outdated software product development model.

a) Evolving technology and b) Heightened customer expectations

Evolving technology

Where we are today in 2014 is a giant contrast to where technology would take us by the year 2020. Here are two examples to bring home the point: as per Gartner, there will be 26 billion devices connected through the Internet of Things by 2020. A Forrester Report estimates corporate spending on cloud computing to touch $191 billion by 2020, which will be a steep hike from the $58 billion recorded in 2013.

Now the problem with a fixed-scope engagement model is that the motivation to build the software product is determined beforehand and ignores the evolving technological landscape. The critical time gap between the product development kick-off to the eventual product release may see many tweaks in the existing technology and the emergence of new technologies that a traditional development model would have failed to take into account. So at the end of the development effort, you will have a product at hand built on legacy technology that no one really wants!

Heightened customer expectations

If at all the slump of the Nokias and RIMs of the world has taught us anything, it is this: brand loyalty, especially in the eyes of the tech consumer, is dead.

Today's consumers are not just brand savvy but quality and experience savvy to boot. They will switch allegiance at the drop of a hat if they are not getting products of superior quality. There is no safeguard for big companies anymore if they are not constantly delivering the newest and most modern experiences to their customers.

With disruptive innovation happening at lightning pace, the market is ever so dynamic. It is precisely here that companies operating in the Product Development Services (PDS) have come to the rescue. PDS companies are factoring in this heightened customer expectation and leveraging the latest technologies to deliver a unique value proposition to partners.

The performance of PDS companies is often measured in terms of tangible business outcomes, such as their ability to impact market share, increase revenues or improve customer engagements.

To sum up, PDS companies are those that display the following key differentiators as outlined by a Forrester report from a few years back, The Shift to Product Development Services 2.0 is On:

1.PDS companies are proactive and not reactive

2.Solutions focused and domain led expertise resulting in tangible business outcomes

3.Leverage the latest technologies

4.Help clients innovate

5.Help clients expedite ‘time to market'

The advent of PDS companies has been a game-changer in the US, and I would expect the same trend to spread throughout the India IT community in the years to come. Outsourcing is no longer being perceived as a ‘dirty word,' associated with low-cost labor arbitrage and staff augmentation arrangements. Today, outsourcers have the option of partnering with PDS companies and ensuring that concrete outcomes which drive true business value see the light of the day.

(The author of this article is President & CEO, 3Pillar Global)